December 16, 2021
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Scaling your supply chain for ecommerce

In this article, Senior Technical Business Analyst Aaron Jestrab outlines simple supply chain steps your business can take to build a great ecommerce reputation and keep your customers happy.

The COVID-19 pandemic has amplified the already existing shift in how consumers shop, research, and purchase products—and that’s true across B2C and B2B. If you aren’t providing your customers opportunities to research and purchase your product online, you are officially behind the curve. But before you build out a B2B ecommerce website, you have to understand the influence it can have on your supply chain.

What is supply chain?

Supply chain is a complex and intricate orchestration of technology, planning, process, and communication. It starts with the procurement of raw materials and ends with the finished product in the hands of your customer, with a plethora of actions between.

Of course, you already know this, so let’s focus on the aspects of the supply chain that are most important to consider for ecommerce.

  • Forecasting
  • Inbound and suppliers
  • Outbound and shipping
  • Integrations for ecommerce
  • Constant monitoring

Forecasting for ecommerce sales

Forecasting is an important step in understanding your potential problem areas. Look at past product sales, results from marketing activities, product movement, procurement data, and current volume. Take all this data and formulate some forecasts based on solid data.

What can you expect to find in this data?

  • Current sales volumes and demand
  • Suppliers that are slow delivering product to you
  • Bursts of volume after specific marketing campaigns
  • Seasonality of sales
  • Lead times for procurement

This information will be essential to guiding you in your ecommerce thought process, including discussions with your partners, planning, process review, and more.

Keep stock and product available

If you don’t have product in the warehouse, it can be difficult to compete in today’s market. Both B2C and B2B consumers look for tell-tale signs in their purchase decisions. Data like “stock on-hand” build confidence for your customers and drive sales and reputation.

Supplier communication

Once you have a sales forecast, you can start communicating with your suppliers. Update them on your forecasted sales. Discuss inventory availability, i.e., do they have enough to supply if your sales skyrocket?

Align on shipping options. If you have a supplier that has been historically slow, talk to them about how they plan to keep up with the pace of ecommerce sales. (It might be a good idea to have a backup supplier in your pocket.) Discuss any additional concerns or external barriers that may influence your ecommerce sales.

Don’t forget—suppliers are not just product related. This is a great opportunity to reach out to your receiving operation to think about your other suppliers, such as those who provide your packaging materials. You can have all your products on the shelf but if you don’t have boxes to ship them in, you won’t get anything out the door.

Receiving operation

“Dock to stock” is an important metric you should keep a close eye on. Many fulfillment centers don’t consider an item “for sale” until it has been received into the assigned storage location. Some activities that occur during this process include delivery acceptance, quality control, inventory counts, repackaging, and kitting. The list goes on and on.

Keeping you inbound, streamlined, and efficient is essential. If you don’t have a warehouse management system (WMS), now would be an opportune time to investigate one. There are many cloud-based solutions available that are effective and affordable to get you off the line. An all-in-one solution is a great place to start, incorporating a whole gamut of functionality from order management to inventory management to product slotting analysis.

Inventory accuracy

Inaccurate inventory can destroy your reputation and drive sales away. It is driven by many factors, including errors in receiving, inventory relocation, inaccurate picking, and more. It can even be the result of theft and other malicious behaviors.

To ensure you have products in stock and know exactly where they are, start here:

  • Ensure you have clear storage location naming.
  • Separate similar products.
  • Be consistent in your inventory storage units.
  • Develop a regular routine to perform physical inventories and cycle counts.

This will have you well on the way to maintaining accurate inventory.

Reverse logistics

Reverse logistics is the process of managing the return of goods from the customer back to the seller or manufacturer. Regardless of what type of finished goods you sell, you need a clear and accepted return policy.

Amazon is by far the market leader in their ease of returns. Customers can click a button and drop a package at any number of return facilities. They have made it so easy that it’s nearly impossible to compete with.

Key aspects to keep in mind for a reverse logistics process are:

  • Keep it easy for the customer.
  • Make sure the return costs are as low as possible.
  • Process the returns quickly by inspecting the product, repackaging if necessary, and getting it back on the shelf for sale as soon as possible.
  • Refund the customer immediately.

Getting your products out the door

Today’s world is growing evermore demanding and that does not stop when it comes to receiving online purchases. (Thanks again, Amazon!)

This means you must manage your outbound and shipping operations to streamline your processes. There are a handful of top priorities that must be considered when preparing for ecommerce—focusing primarily on parcel delivery, not pallet shipments.

Fulfillment location

The location of your distribution center can play a big role in the speed and cost of delivery. Most companies won’t move to a new location or open a new facility just to gain the upper hand on prime shipping locations—but there are options.

  • Ship from your own location(s)
  • Select a facility with proximity to your largest customer base
  • Plan and expand to distribute from multiple facilities
  • You may have to invest in more technology, but you will also maintain control of the operation
  • Third-party logistics (3PLs)
  • Store and ship your product for you
  • In-house experience integrating to various systems
  • Often benefiting from excellent rates from carriers
  • Some will offer API access for shipment rating and delivery speeds
  • Experience in on-time shipping and fulfillment of orders
  • Have large footprints to serve from different regions

In some instances, you may decide to take a hybrid approach, shipping from your own location and utilizing 3PLs.

Pick and pack

Operations in the fulfillment process start with placement of your product in a pick area. By now, you should know what your fastest moving, highest volume products are. Slot these products in prime picking areas as close as possible to your picking lines. This drives higher throughput to the order picking process.

Make sure you don’t put extremely similar items right next to each other, as that can drive mis-picks. When you are investigating a WMS selection, look for pick-and-scan validation functionality, which can greatly reduce your accuracy errors.

Ship the product

In the US market, all three major shipping carriers offer software that can be integrated into your supply chain: UPS WorldShipFedEx Ship Manager, and Endicia for USPS. This will work great for you if you only utilize one shipping carrier.

However, there are extensive options available for a multi-carrier shipping solution. These solutions allow you to leverage multiple carriers in a single solution.

Benefits of a multi-carrier solution include:

  • Single point of integration for all carriers
  • Rate shopping
  • Service level selection
  • More cost efficient (vs multiple carrier systems)
  • Delivery speed guarantees or requirements
  • Full integration capabilities with software APIs

Rate negotiations are often forgotten. If you have an existing relationship to a shipping carrier such as UPS or FedEx, it is common to negotiate discounted rates based on shipping volume, shipment destination data, total spend with the carrier, etc. If you have already negotiated rates, talk to your carrier about re-evaluating the rates based on your forecasted volume.

Let the information flow

All these processes and systems enable visibility and connectivity for your ecommerce supply chain system. Your customers expect to see this information online, and the information must be accurate.

It is essential that you have well designed, fully documented methods to integrate your systems. Application programming interfaces (APIs), webhooks, and data feeds make these integrations possible.

The supply chain integrations most important for ecommerce include:

  • Inventory availability
  • Shipping options
  • Shipping cost
  • Shipping time expectation
  • Customs and duties
  • Return processing
  • Order transmission
  • Order status and shipping updates
  • Communications

This list of integration points is specifically tied to your supply chain operations and are just a few of the many integration points that an ecommerce site will require.

Customer communication

From an ecommerce supply chain perspective, there are a few very important types of communication that tie directly to your logistics processes. You will need to think through each of these and—considering your unique customer base—determine the appropriate ones to use, when they will get sent, and how many to send.

Common supply chain communication include:

  • Order confirmation
  • Shows the user the order was successfully accepted
  • May show which warehouse it was sent to
  • Shows the selected shipping method and expected delivery time
  • Payment processing
  • Order status updates
  • Transmitted to warehouse
  • Processing (picking)
  • Shipped
  • Delivery status
  • Order delays
  • Inventory based emails
  • Back-order status
  • Back in stock
  • Low stock level

Every customer has special needs and customization is commonplace. Make a list of all the communications you need to produce with a synopsis of the communication, when it occurs, and the audience.

Preparing for a successful ecommerce launch

Ecommerce can be fickle, and many businesses launch ecommerce websites with several unknowns. Whether you have a new niche product, a different take on an existing product, or products that are staples for the industry, you will want to monitor your ecommerce performance closely.

For example, what will you do if you sell out of a product? You don’t want to oversell and have to reject orders later.

Start by preparing your workforce for the launch day of your ecommerce website. Ensure you have the staff and bandwidth to meet your estimated demand on your pick, pack, ship lines.

Prepare your carriers. You may need to schedule additional pickups to handle the outbound packages to various carriers. As a shipping provider, your carriers will appreciate the heads up, as this helps them prepare for increased demand.

You could drop ship directly from your manufacturer or supplier to reduce the distribution center load. You might line up additional suppliers of the same merchandise or have other options in your back pocket that can help supply the demand of the consumer.

Monitoring supply chain at ecommerce launch

By launch day, you will have many indicators and analytics at your fingertips. This allows you to be proactive and not reactive. Some key metrics to monitor include:

  • Demand forecasting
  • Do this ahead of time and be ready
  • Inbound order volume from the ecommerce
  • Watch for spikes in volume
  • Be ready for the potential of out-of-stock situations
  • Pick pack speed and efficiency
  • Watch for bottle necks
  • Keeping the line supplied
  • Keep products, packaging, and other critical supplies stocked
  • Monitoring other activities
  • Inbound and receiving
  • Kitting or other special services
  • Manufacturing
  • Keep your communications lines open
  • Shipping carriers for drop-off and pick-up changes
  • Suppliers when you start running low on product or consumables
  • Technology support incase system issues occur
  • Caterer to bring lunch in for your teams
  • The list goes on…
  • Website stability and traffic
  • Make sure it is running well
  • Response times are appropriate
  • Scale up server resources if needed
  • Look at cloud services that can be scaled instantaneously in real time

These types of issues will arise. However, if you have a plan, you can react with precision and quickly resolve them without affecting your customers.

Celebrate success

The supply chain side of ecommerce is an intricate balancing act that depends on a variety of technologies, people, and processes. It is a fluid machine that must be able to flex and adjust agilely in an ever-changing world.

If you approach your ecommerce initiative with a plan and think through these contingencies on common situations that may arise, you will be far ahead of the game when it comes time to handle and resolve these conflicts.

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